Massive performance growth coexists with quarterly losses: Where does the "temperature difference" in the insurance industry's annual reports come from?

Ask AI · What is the mystery behind the investment strategies behind profit differentiation in the insurance industry in the fourth quarter?

As the 2025 insurance industry annual report season draws to a close, a stack of impressive results sketches an overall picture of a favorable development trend for the industry. The attributable net profits of A-share listed insurance companies all surged. China Life, Ping An, China Pacific Insurance, PICC, and New China Insurance increased year-on-year by 44.1%, 6.5%, 19.0%, 8.8%, and 38.3%, respectively. In a market environment where the long-term interest rate midpoint is trending downward, they delivered a solid set of answers.

However, behind the industry’s overall red-hot performance, the direction of profits in each company’s fourth quarter last year shows “differentiation.” Facing the same rounds of turbulence and adjustment in the capital markets, some insurers saw pressure on single-quarter profits, while others achieved positive growth. This also reveals the deeper “password” behind differences in equity investment strategies among insurance funds.

New accounting rules magnify differences in investment strategies

In the fourth quarter of 2025, both A-shares and Hong Kong stocks closed out amid volatility. According to Wind data, the CSI 300 index fell by 0.23%, the ChiNext index dropped by 1.08%, and the Hang Seng index fell by 4.56%. Structural adjustments in the capital markets—like an unexpectedly tough exam—tested each insurer’s investment resilience and strategic composure.

China Life was the first to release its 2025 financial report. For the full year, the company’s net profit increased by 44.1% year-on-year to 1540.78 billion yuan. However, due to the intensified volatility in the fourth-quarter equity and bond markets, profit or loss from changes in fair value was significantly compressed, and the company posted a loss in the single quarter. At the earnings briefing, China Life’s president Li Mingguang explained that this “was mainly due to structural adjustments in the capital market in the fourth quarter, which caused some of the stocks and funds the company held to retrace.” He also emphasized that such volatility “reflects changes in the capital market and does not represent the company’s long-term operating trend.”

Then, in the annual reports released by China Pacific Insurance and Ping An, both companies saw positive year-on-year growth in their fourth-quarter single-quarter net profits, reaching 78.1 billion yuan and 19 billion yuan, respectively. A senior research analyst in the insurance industry told reporters: “Each company’s equity asset allocation ratio and investment strategy are not the same, so their sensitivity to structural adjustments in the market naturally differs. As a result, even under the same market environment, they show differentiated outcomes—net profit turning positive versus negative, and differences in the size of the decline.”

Tian Lihui, a professor of finance at Nankai University, gave reporters an illustrative analogy: “The new insurance contract accounting standards are like a ‘magnifying glass,’ clearly displaying insurers’ equity risk exposure and the differences in strategy in the income statement.”

Specifically, China Life has a larger equity exposure and more of its holdings are categorized as FVTPL (measured at fair value with changes recognized in profit or loss). Market adjustments in the fourth quarter led to fair value losses directly eroding profits. By contrast, Ping An and China Pacific Insurance allocated a substantial proportion of high-dividend assets to FVOCI (measured at fair value with changes recognized in other comprehensive income). Their fair value fluctuations do not affect current-period profit, effectively isolating market shocks.

At the earnings briefing, Ping An’s deputy general manager and chief financial officer Fu Xin disclosed detailed data: 57% of Ping An’s stock classifications are FVOCI, with a scale of 5413 billion yuan. This contributed pre-tax unrealized gains of more than 900 billion yuan, directly bolstering net assets rather than being recognized in profit. She vividly described these OCI stocks with high dividends and low volatility as the company’s “ballast stone”: “First, because their returns are very steady; second, because they contribute a long-term, sustainable release of value; and third, in the low-interest-rate era, they can deliver very robust returns and results.”

Equity investment becomes the deciding factor

Although quarterly profit performance diverged, when looking across the full year of 2025, the leading listed insurance companies all delivered eye-catching investment performance. With insurance giants holding roughly 16 trillion yuan in investment assets, and facing a market environment of a downward shift in the long-term interest rate midpoint, they all, more or less in unison, chose to proactively increase their equity allocation in order to offset the pressure from falling fixed-income investment returns.

Data shows that as of the end of 2025, China Life’s public-market equity investment scale exceeded 1.2 trillion yuan, an increase of more than 4500 billion yuan from the beginning of the year. The allocation ratio of stocks and funds rose from 12.18% to 16.89%. Ping An increased its balanced allocation of dividend-value and technology-growth equity. PICC added net purchases of A-shares of more than 400 billion yuan, and the equity share in the secondary market increased by 4.3 percentage points.

This strategic adjustment is directly reflected in investment yield. China Life achieved its best investment performance in recent years, with total investment return reaching 6.09%. New China Insurance’s total investment yield increased by 0.8 percentage points year-on-year to 6.6%. Ping An’s insurance funds’ investment portfolio delivered a comprehensive investment return of 6.3%. Both PICC and China Pacific Insurance had total investment yields of 5.7%.

At the earnings briefing, China Life’s vice president Liu Hui summarized the company’s investment strategy as: “Equity investment is the deciding factor for enhancing returns; fixed-income investment is the ballast stone for stabilizing returns; and alternative investments are the growth engine for expanding returns.” She said that in 2025 the company strategically increased its equity proportion by 5 percentage points, focusing on new quality productive forces and high-dividend, high-quality assets. At the same time, in the fixed-income segment, it has accumulated 3 trillion yuan of long-term high-quality assets, continuously strengthening its base in a low-interest-rate environment.

PICC’s vice president Cai Zhiwei shared the company’s investment insights: “In 2025, the investment scale of the group’s OCI stocks increased by 158% compared with the beginning of 2025. The share of these in investment assets rose by two percentage points, and the average dividend yield of the OCI stocks held reached 4.27%.” He also specifically mentioned the strategic stock investment portfolio set up by PICC: “Last year, the full-year net asset value growth rate exceeded 40%, which also laid a solid foundation for us to achieve investment returns that can cross cycles and remain stable over the long term.”

Asset-liability matching for 2026 becomes the main line

At the starting point of 2026, the challenges facing insurance funds remain severe. The low-interest-rate environment continues, and high-quality fixed-income assets are scarce—asset-liability matching has become a common challenge for insurance companies. How to continue tapping the potential of equity investments while controlling risk has become an important issue for investment managers.

At earnings briefings, management teams from multiple insurers said that strengthening asset-liability management is not only a regulatory requirement, but also a need for companies to build cross-cycle and long-cycle operating and management capabilities. Under a low-interest-rate environment, coordinating scientific management of liability duration and flexible control of asset duration has become an industry consensus.

Regarding the equity investment layout for 2026, Cai Zhiwei revealed PICC’s investment thinking. On the one hand, it will continue to focus on the allocation of OCI high-dividend stocks. On the other hand, it will focus on growth-oriented investment opportunities embedded in the “14th Five-Year Plan” period, strengthen research on key industries and key sectors, and plan the TPL stock allocation in a reasonable way.

In the alternative investment space, Cai Zhiwei said that in 2026 it will continue to increase efforts to develop and allocate innovative alternative products such as asset securitization. Using the funds already established by the group and the private equity funds that are planned to be established as a starting point, it will focus on national key strategies and investments in areas related to insurance. “Our new PE fund is also being prepared and planned.”

China Life will continue to leverage its advantages in long-term capital and patient capital, increase product innovation and strategy innovation, and build an alternative investment ecosystem across all product types and all life cycles. Liu Hui disclosed that the company’s overall alternative investment scale has already exceeded 1 trillion yuan, opening up room for long-term growth.

Facing the challenges of the low-interest-rate environment, Cai Zhiwei shared PICC’s three-pronged response: first, strengthen active investment management of fixed income, seize the high points of interest rates, and increase allocation to long-duration bonds; second, increase the contribution of high-dividend stocks to net investment yield; third, promote a transformation in alternative investments—focus on stabilizing debt, strengthening equity, and optimizing investments in tangible assets—so as to proactively explore alternative asset investment opportunities with stable cash returns.

Many industry insiders believe that in 2026, insurance funds’ equity investments will show two major trends: first, the allocation proportion of FVOCI-type assets characterized by high dividends and low volatility will continue to rise, in order to smooth fluctuations in the income statement; second, by aligning with national strategies and new quality productive forces, they will mine structural opportunities with long-term growth potential. Under the main thread of asset-liability matching, insurers’ investment strategies are shifting from simple scale expansion to more refined structural optimization and risk management.

As Li Mingguang said, life insurance companies have operational characteristics across long cycles and across cycles. He advises the market to “reduce excessive over-interpretation of single-quarter profits.” For insurance funds, the real test is not how they respond to short-term volatility, but the dynamic balance of assets and liabilities and value creation from a long-cycle perspective. The investment chessboard for 2026 has already been laid out; how insurance funds move their pieces is worth continued attention.